Browse Tag: usda

The food desert is that stretch of town or region where no grocery stores are operating, forcing residents into leaving the area to shop for basics, or worse, subsist on junk food for lack of better choices. In social and health terms, food deserts are a serious problem, but in economic terms they can represent commercial real estate opportunity. CRE investors seeking to profit from filling local needs can do much worse than finding highly populated areas that are underserved by grocery stores. These areas cry out for the development of food stores to fill the gap. Tools to find these areas are very helpful for acquisition and site selection – but where can one find these tools?

As it turns out, the federal government is one place to look. Enter the Food Desert Locator, a website run by the US Department of Agriculture. It’s an interactive web application that takes reams of real estate, economic and demographic data and provides an easy-to-use mapping interface to cut through the clutter to get to the sites that really cry out for grocery stores.

The mapping application allows you to select areas based on income and access to grocery stores, as well as compare trends across years to find areas that have seen changes in access. Subpopulations are also selectable, allowing a range of site selection criteria.

Of course the final step in conducting this research is to use CommercialSearch.com to browse the retail property and land listings that lay in the areas you define with the Food Desert Locator.

With this one-two punch, site selection can be easy, quickly bringing you one step closer to a high-foot-traffic, only-game-in-town investment play in grocery store development.

The role that agriculture plays in the US economy is enormous, owing in part to the fact that the US is by far the largest exporter of ag products. As a critical sector in commercial real estate, agriculture receives a great deal of attention from federal government econometric researchers, which gives ag land investors and market watchers a wide range of data to use. But what are the leading indicators (predictive of future price moves) and what are the trailing indicators (numbers that follow motion in other numbers)? What’s cause and what’s effect in this marketplace?

As if to answer the question by trying to answer *any and all* questions under the topic’s umbrella, the US Department of Agriculture (USDA) publishes a mountain of data concerning the agricultural land market, and it’s available for free.

Beginning with the National Agricultural Statistics Service’s publication, Land Values 2015 Summary , investors can learn recent histories in farm land value by state, broken down by irrigaged and non-irrigated land as well as by a host of other types.

It’s a great starting point to explore the relationships between land prices and the prices of agricultural products, as well as the phenomena of inflation, agricultural land speculation and interest rate policy as they apply to this giant sector of the national commercial land market.

RLI Educational Tracks Are Available

The REALTORS Land Institute (RLI) is ready to help professionals navigate the ins and outs of the agricultural land marketplace with continuing education and conferences focusing on this sector, including the upcoming National Land Conference in Dallas, March 11. Learn more at RLILand.com

The USDA’s semi-annual survey on the state of farm finances, called the Agricultural Resource and Management Survey (ARMS) is “the only national survey that annually produces observations on field-level farm practices, the economics of the farm operating the field, and the characteristics of farm operators and their households”. This year’s ARMS look at the economics of farm operations is showing a race between rented and purchased land prices, both rising, but one lagging the other significantly.

Owning Vs. Renting Markets

Ownership means less in the land use picture than in other lease-driven sectors. Typically, rented farmland is worked according to the needs of the renter, not the landlord. Leases are often informal. According to the most recent survey, 93 percent of producer/respondents say the landlords aren’t involved in the decisions about land use, crop or livestock selection. That said, the booming market in farmland might suggest that capital is flowing to such deals from distant capital centers.

Not so, says the survey. 75% of landlords live in rural areas within the state where the farm is located. About 17% of those are within the state, but in “urban” areas (rated as populations over 10,000). Only 8% of farm landlords live out of the state, according to the USDA study.

The average US farm has approximately three rental agreements in place. These might include fixed or flexible cash rent, crop share and even free rental agreements. As the farm size rises, the number of rental agreements increases.

According to presenters at Farmland Leases: Tales, Types and Trends, a conference sponsored in November 2012 by the Chicago Federal Reserve, higher crop prices are forcing changes in rental agreements, requiring renters to make extra payments, often based on crop prices and yields. Even so, cash rental rates are lagging ownership prices in farmland.

Iowa Farmers Warn Of Land Price Bubble

Rental and ownership looking flush as it is, who’s on the bearish side? Farmers.

A majority of the farmers responding to a statewide poll believe Iowa farmland is overvalued and prices are much higher than the land is worth.

Sixty-eight percent of the producers responding to the 2012 Iowa Farm and Rural Life Poll agreed that farmland values are too high and cannot be sustained at current levels. Forty-eight percent agreed that “the farmland market is in a bubble that will eventually burst and lead to major drops in values.”

Other farmers were more optimistic, with 41 percent believing that land values will continue to rise, but at a slower pace. More than 60 percent of the poll participants agreed that quality cropland is still a good investment.

Asked to rate the impact of a number of factors on recent farmland price escalation, 85 percent agreed or strongly agreed that high corn and soybean prices was the most influencial factor driving higher prices. Seventy-two percent believe competition between neighboring farmers who want to expand their land also is a major influence boosting land prices at auctions.

Two-thirds or 66 percent of farmers indicated that low returns on other types of investments was a strong or very strong influence. Seventy-one percent of survey respondents agreed that rising land prices have led to intensification of farming.

Somewhere between the bear and the bull lies the barn. What will its future hold? Is a kind of financialization of farmland underway where non-operator owners will ultimately make a killing but leave the operators in a lurch? Or is the explosion in population and food demand a built-in support for land prices and rents? Time will tell.